European Insurance and Occupational Pensions Authority launches Occasional Research Papers and publishes inaugural study on cross-border fixed-income portfolio frictions

The European Insurance and Occupational Pensions Authority (EIOPA) has launched a new “Occasional Research Papers” series and released its inaugural paper, prepared with external researchers and academics, examining how European insurers and banks allocate fixed-income portfolios across domestic and international markets. The paper highlights two international portfolio frictions that the authors say are not explained by traditional factors such as home-country or home-currency biases. The analysis finds that the composition of domestic fixed-income holdings is largely mirrored in foreign portfolios rather than offset, with higher domestic corporate bond shares tending to be replicated abroad, labelled a “domestic projection bias”. It also finds that multinational groups do not appear to use foreign subsidiaries to optimise global portfolios, as subsidiaries’ holdings tend to resemble those of local market peers, described as a “going native bias”. The findings also suggest that well-developed insurance and pension fund markets support active corporate bond markets, while the newly identified frictions indicate challenges for efforts to deepen and integrate European capital markets. EIOPA positioned the series as a channel to combine in-house expertise with work from external researchers, showcasing studies selected via its External Research Platform, which enables analysis of Solvency II and IORP II reporting data in a secure environment.